Chapter 8, Problem 8.1Q

What are the primary issues involved in revenue recognition?

To determine

To explain: The primary issues involved in revenue recognition.

Answer to Problem 8.1Q

The primary issues involved in revenue recognition are:

• The amount of money that is needs to be charged from the customer.
• When that amount should be recorded in the book of accounts.

Explanation of Solution

Revenue Recognition:

Revenue recognition refers to the principle which tells about the conditions under which the revenue is recognized. It is one of the generally accepted accounting principles (GAAP). Generally, revenue is recognized when the commodity is supplied or given to the customer.

The primary issues involved in revenue recognition are:

• The issue is related to recognize the amount needs to be charged in lieu of the services or goods provided.
• Second issue is the timing of recognizing the revenue. The company has to decide when it should recognize the revenue. Generally, revenue is recognized when the good and services are provided by the company to the customer.

Conclusion

Thus, the main issues are related to the amount nee to be charged and when it should be charged.